Valero targets more North American crude supply for Quebec refinery

Valero plans to invest between $106 million and $192 million to overhaul its handling capacity at the Quebec refinery, including increased tankage and new crude carrying ships, in order to increase access to North American crude. That will provide it with a competitive advantage.

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By SHAWN MCCARTHY

OTTAWA -- Valero Energy will invest as much as $192 million
in its Quebec refinery if Enbridge proceeds with its plan to
reverse its Line 9 pipeline, a project one Quebec business leader
described as critical to the province's refining and petrochemical industry.

In a presentation to analysts, Valero CEO Bill Klesse said
the San Antonio-based company has committed to take
"substantial volume" of light crude from Enbridge's Line 9,
which, subject to regulatory approval, will be reversed to
bring oil from western North America to Montreal.

Valero will then deliver the crude from Montreal to its refinery near Quebec City by
company owned ships down the St. Lawrence.

Valero plans to invest between $106 million and $192 million
to overhaul its handling capacity at the refinery, including
increased tankage and new crude carrying ships, in order to
increase access to North American crude. That will provide it
with a competitive advantage over Atlantic basin refineries
that rely on high priced imports.

In addition to supporting Enbridge's Line 9B reversal, Valero
is expanding the 265,000 bpd refinery's ability to receive
western crude by rail and will import up to 50,000 bpd from
Texas's prolific Eagle Ford tight oil play.

"I believe that within a year or two, our Quebec refinery
will be a North American-supplied refinery where it is a
foreign supplied refinery," Mr. Klesse said in a
presentation.

Suncor Energy also expects to virtually eliminate the need
for imported crude to feed its 135,000 bpd operation in
Montreal, a city that has seen five refineries close over the
past 25 years.

The Enbridge project along with TransCanada
Corp.'s proposed pipeline to Eastern Canada got a boost from
Quebec's Federation of Chambers of Commerce. In a speech at
the Toronto Board of Trade, chamber president Francoise
Bertrand said the new oil pipelines are crucial for the
competitiveness of the refining and petrochemical industry in Quebec,
particularly in Montreal's east end where Shell closed a refinery just three years ago.

Every necessary means must be taken to ensure that the refining industry remains
competitive and active in Quebec, Ms. Bertrand said.

In a telephone interview, she said that despite opposition
from environmental groups, the "silent
majority" of Quebeckers are supportive of plans that would
wean the province off imported oil, especially if that means
protecting high wage jobs. A chamber sponsored poll found 70%
of Quebeckers supported the Enbridge plan to bring western
crude to Montreal.

She said the loss of refineries in Montreal devastated her
province's industrial employment base. "We cannot afford to
lose more of them," she said in the interview. "And the petrochemical industry is also
much more interesting today because of the new projects that are developing."

The National Energy Board will hold hearings in Ontario and
Quebec on Enbridge's pipeline reversal, while TransCanada is
in the process of assessing commitment from shippers before
submitting to the regulator its plan to convert a portion of
the natural gas mainline to carry oil.

Ms. Bertrand acknowledged that the public has had its
confidence shaken with images of major pipeline spills, first
by Enbridge in Michigan in 2010 and this spring by ExxonMobil
in Arkansas.

Enbridge spokesman Glenn Herchak said the company responded
to the Michigan accident by spending $1.64 billion over three
years to overhaul its safety practices, both in spill
prevention and response.

But environmentalist Stephen
Guilbeault, of the Montreal-based group Equiterre, said
supporters of the pipelines should not underestimate the
concerns in Quebec. He noted that several municipalities,
including Montreal, have urged the provincial government to
hold its own environmental assessment of the
Line 9 plan. "To people who think this is a fait accompli or
a slam dunk, I would say they need to err on the side of
caution," he said.

Dow Jones Newswires

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